The Northampton Regional Livestock Centre Company Ltd v Richard Andrew Cowling and Another
| Jurisdiction | England & Wales |
| Judge | Lord Justice Tomlinson,Lady Justice King,Lady Justice Arden |
| Judgment Date | 30 June 2015 |
| Neutral Citation | [2015] EWCA Civ 651 |
| Docket Number | Case No: A2/2014/1415 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 June 2015 |
[2015] EWCA Civ 651
Lady Justice Arden
Lord Justice Tomlinson
and
Lady Justice King
Case No: A2/2014/1415
IN THE COURT OF APPEAL (CIVIL DIVISION) A2/2014/1434
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
MR JUSTICE GREEN
HQ12X03155
Royal Courts of Justice
Strand, London, WC2A 2LL
Matthew Reeve & Emily McCrea-Theaker (instructed by Geoffrey Leaver Solicitors LLP) for the Appellant
Timothy Walker (instructed by DFA Law LLP) for the First Respondent
David Lewis ( direct access) for the Second Respondent
Hearing dates: 3, 4, 5 March 2015
Introduction
Like many other livestock markets in the UK, the Northampton Livestock Market was dealt a mortal blow by the foot and mouth crisis of 2001. The livestock auction at Northampton closed permanently in October 2002 and shortly thereafter a decision was taken by the company which owned it, the precursor of the Appellant, to sell the site on which the market was situated. Unhappily the process of disposal, which was protracted, has spawned equally protracted litigation. The litigation has in part, I have no doubt, been driven by considerations other than economic expedience. That said, on the findings of the judge, the litigation has vindicated the assertion by the owners of the market that one of those entrusted with the task of selling the site, a partner in a firm describing itself as "property consultants", had profited from an egregious breach of fiduciary duty. The irony of the litigation is that, in my view, it has demonstrated conclusively that that breach of fiduciary duty has conferred upon the owners of the market a substantial windfall benefit. However, it is right that a fiduciary should be made to account for the profit which he obtained by reason of his breach of fiduciary duty. The principal point on this appeal has been, to my mind, whether the judge was right to exonerate from joint and several liability for this breach of fiduciary duty the defaulting fiduciary's partner who was himself unaware of his partner's sharp practice. The innocent partner is Mr Andrew Cowling, a chartered surveyor, and the First Respondent to this appeal. His then partner, Mr Neil Lawrence, the Second Respondent to this appeal, has no professional qualification.
The trial occupied eleven days and the judge, Green J, produced a long and careful judgment of immense detail, to be found at [2014] EWHC 30 (QB). I propose only to summarise the facts relevant to the issues which arise on this appeal. My summary will often be taken almost verbatim from the judge's account and not always with attribution. For a deeper understanding of the facts resort may be had to the judge's judgment. The judge's careful and for the most part unchallenged findings in my view rendered forlorn most of the points pursued on this appeal.
Mr Cowling is the central figure in this dispute. He is a Northampton man born and bred, who qualified as a chartered surveyor in 1977 after obtaining a degree in Estate Management at Reading University. After training at the national firm Chestertons in London he practised as a chartered surveyor and auctioneer with the family firm Merry Sons and Cowling in Northampton until 1996. In that year he set up a commercial property practice entitled "Merry's Commercial Limited" with Neil Lawrence and two other partners. On the retirement of those two other partners in July 2002 Mr Cowling and Mr Lawrence formed a new partnership known as MCL Property Consultants, ("MCL").
Mr Cowling and Mr Lawrence were the two defendants at trial, separately represented. The Claimant at trial, Appellant on this appeal, is, as I explain hereafter, effectively the owner of the market site. It appeals on the point of joint and several liability and also against the judge's conclusion that the Respondents were not negligent in their conduct of the marketing and sale of the site. Mr Lawrence appeals against various of the judge's conclusions. Mr Cowling supports his appeal in those respects.
The facts in outline
In the 1990s redevelopment plans formulated by Northampton Borough Council ("NBC") threatened the continuation of the livestock market which had been held on two successive town centre sites since the 19 th Century. The company from which the site was leased and by which the market was operated, Northampton Livestock Sales Limited ("NLS") resolved to move the market out of the town centre. It sought to acquire a new 12.7 acre site at Lilliput Road, Brackmills, ("the Site"). For that purpose a new company was formed, Northamptonshire Auctions PLC ("the Company"). Mr Cowling was at all material times Chairman of the Company and the largest single shareholder in it, holding 41%. Mr Lawrence at no time had any interest in the Company. The Claimant at trial, Appellant on this appeal, is The Northampton Regional Livestock Centre Company Limited. The Appellant is the assignee of the Company's causes of action, if any, against Mr Cowling and Mr Lawrence. The Claimant/Appellant brought this action on behalf of all shareholders in the Company, including therefore Mr Cowling.
The Site was sold to the Company in 1996 by the Commission for New Towns, a Government agency later renamed English Partnerships, ("EP"). Planning permission for an auction and sales centre with associated facilities and overnight lorry parking had been granted in September 1995.
The planning permission granted in 1995 was not limited to use of the Site for the auction of livestock, although that was the use to which it was mainly put until 2002. The Local Plan for 1997 records that B8 permission was given to allow the relocation of the livestock auction out of the town centre and to the Site. The category B8 is "distribution warehouse." B1 is office use. B2 is light industrial. There was an ambiguity about the Local Plan that later caused considerable debate among developers. The initial 1997 Local Plan did not expressly prohibit the use of the Site for other B1, B2 or B8 purposes; but nor did it expressly permit such usages or suggest that the planning authorities would adopt a sympathetic approach to further applications for change of use. In February 2005 NBC confirmed that the Site could, within its existing consent, be used as a car auction and sales centre, i.e. sale of prestige and imported vehicles, or as a receivership auction centre, i.e. sale of bankrupt stock, written-off vehicles, plant and machinery, office furniture etc. and as a commercial vehicle auction centre.
The Site had clear development potential. It is close to junctions 15, 15a and 16 on the M1 motorway. It is adjacent to the Brackmills industrial estate. Northampton is of course a prime centre for logistics and warehousing located in the middle of England.
The Site was sold to the Company by EP at a discounted price of £52,500, a relatively nominal consideration to reflect its intended use as a cattle market, thereby preserving this facility for the benefit of the local farming community. However in view of its development potential EP insisted on an "overage" or "clawback" provision pursuant to which EP would be entitled to a percentage of the increase in value of the Site over a base value of £1.2 million in the event of a change of planning use occurring over the next 21 years. The percentage clawback started at 100% of the incremental increase in value over the first two years, but then reduced over time. In respect of a change of use permitted by a planning permission granted between 2004 and 2006, which is broadly the period of interest in the present case, the clawback was 40%. Thus had the company in 2005 sold the Site for £3 million on a basis which was contingent on the purchaser obtaining planning permission for change of use, 40% of the increase in value over £1.2 million, thus £720,000, would have been payable to EP, leaving the Company with a net recovery of £2.28 million.
The purchase price of £52,500 represented only a small part of the Company's initial investment. Mr Cowling and his friends managed to raise £750,000, of which £320,000 represented a personal investment in the company by Mr Cowling. A further £750,000 was borrowed from National Westminster Bank. To the purchase price of £52,500 was added a further approximately £47,500 comprising vendor's costs, infrastructure contribution to the vendors of £36,300 and a contribution towards compensation payable to an agricultural tenant. A further £1.3 million was spent on road engineering and market facilities such as internal and external livestock pens, sale rings, café, sale rooms, offices and lorry park as well as water and sewerage infrastructure.
The foot and mouth crisis of 2001 effectively destroyed the livestock auction business of the Company. After a brief resumption of trading in 2002 the livestock auction business was permanently closed in that year. From 2002 onwards the Company explored the possibility of obtaining planning permission for a change of use to B1, B2 or B8 usage. The Company retained a limited income from lorry parking and the on-site café, which was insufficient to enable it to meet its overheads. From 2002 onwards the financial position of the Company became ever more stretched. Its indebtedness to the bank mounted substantially as its income stream declined. Its only material asset was the Site which would have to be sold in order to repay the bank and to provide at any rate some return to...
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